Merging money? Couples living together need a financial plan

NEW YORK — Budgets are not romantic, but unwed couples who want to live together should break out a calculator before calling the moving trucks.

Creating a financial plan can help prevent arguments and unpleasant surprises, and protect each person from costly financial missteps. And if they merge their finances carefully, couples can make living together a big money saver.

“It’s easier to have these conversations before you’re under the same roof,’’says Nancy Skeans, a partner at Schneider Downs Wealth Management Advisors in Pittsburgh.

The number of unmarried couples choosing to live together continues to grow. More than 7 million U.S. households were led by unmarried couples in 2013, up 1.7 percent from the year before, according to estimates by the U.S. Census Bureau.

Alexandra Gambale moved into an apartment with her boyfriend, James Murad, about a year ago. Together for three years, the 24-year-olds decided to keep their bank accounts separate, but split groceries and other monthly bills evenly. She sends Murad money through the mobile payments app Venmo, and then he pays the bills.

“I’d like to think we moved in together because we love each other, but yes, money was a part of it,’’says Gambale, who works at a public relations company in New York. “We live in a much nicer apartment because we split the rent so we can afford more.”

Here’s some financial tips for couples who plan to live together:

HAVE THE TALK

Schedule a time to have a conversation about money. Try a Saturday morning, or another day when the both of you don’t have other obligations, says Alexa von Tobel, CEO of financial planning website LearnVest.com.

Discuss exactly how much you earn and don’t let debt be the elephant in the room. Be ready to detail your debts and to disclose your credit score, says von Tobel.

Although you may not be responsible for paying your partner’s debts, you may be impacted if his or her credit card bills or student loans are so large that your partner can’t be relied upon for regular joint obligations, such as rent or utilities.

If you eventually plan to get married, keep in mind that you may end up on the hook for your spouse’s debt depending on which state you live in.

“Sitting down and figuring out your finances is a smart way of getting ahead of problems,’’says von Tobel

SET RULES

Decide exactly what, and how much, each of you will be responsible for. Bills don’t have to be split evenly. If one person makes more than the other, maybe he or she can pay a larger portion of the rent and the other pays for groceries. Don’t forget to include other monthly bills, such as electricity, gas and cable.

When living together, the ideal situation is to live off one salary, says John Sweeney, an executive vice president of retirement and investing strategies at Fidelity. That’s not always possible, but setting a budget close to that amount can help. Both of you will have lower expenses and the ability to save more. And if one of you is laid off, you’ll know that you can keep up with expenses with just one salary, says Sweeney.

PLAN FOR BREAKUP

Even if you think your relationship is solid, plan for what happens if it ends. Who will stay in the residence? If you’re renting, consider if you should both be on the lease. See what terms the least outlines if one person leaves, as you don’t want to be on the hook for a place you can’t afford by yourself.

If you plan to buy a home together, couples should first hire an attorney and draw up a purchase contract beforehand. The contract can spell out how much each person will contribute and may include what happens if the relationship ends.

TO COMBINE ACCOUNTS OR NOT?

Merging all bank accounts is not a good idea. But a joint checking account to pay bills or buy groceries can be a good start to test how you both of handle it. “It’s a way to practice,’’says Skeans.

If you’re in a more committed relationship, you can try opening a joint savings account for specific goals, such as an upcoming vacation or wedding.